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MicroFridge Case Solution
MicroFridge has been the pioneer and market leader in United States for the “home away from home” market. While the company serves various customer categories in this market, the main source of revenue for the company remains the school and college dorms facility where the company’s MicroFridge has been successfully sold since the 1990s. However, as the company continues its expansion plans in the future, it is faced with a number of challenges. Global expansion plans mean that the company should not concentrate on, for example, a single vendor. While some strategic alternatives with pros and cons are discussed below, the recommended plan of action would be one where the company experiences greater independence in decision making, in choosing its markets and suppliers, and forms backward and forward integration.
Following questions are answered in this case study solution
Introduction & Problem Identification
Strategic Alternative 1
Strategic Alternative 2
Strategic Alternative 3
Recommended Action Plan
Case Analysis for MicroFridge
1. Introduction & Problem Identification
MicroFridge as a company is well-established among its target markets. The laurels for the company also come due to its success in preventing tough competition from coming in. However, with the company’s future plans in mind, it faces some challenges. Currently, the company is primarily dependent on one supplier for both refrigerator and microwave supply. The company’s reliance on Samyan R&F is leading the vendor to overcharge the company for supplies and also puts the vendor in a dominating role. Secondly, competition is likely to pick the pace in the next few years. Hence, MicroFridge needs to find more revenue sources and probably offer an increasing product range to keep its customers loyal and to offer them a total package.
However, expansion plans also mean that Robert Bennett needs to arrange more sources of financing for the company. This is because the company in the future may be leading with more of international suppliers.
2. Strategic Alternative 1
The first alternative that the company can consider is setting up its own distribution centers. Considering such an option will bring in a lot of benefits to the company. Currently, the dependence on Samyan R&F means that both refrigerator and microwave are kept at Samyan’s distribution center before shipment for final matching and combined shipment. If the company had its own distribution center that was located closer to major concentration of its customers, this will cut down on travel time, transportation cost, and the costs of intermediaries.
The reason that a distribution center is important for MicroFridge is that its supplies and components such as refrigerator and microwave are coming from different parts of the world. The customer, on the other hand, is delivered a combined package of microwave and refrigerator to remove confusion and time differences in receiving final products. Hence, if the company had its own distribution centers, it can more effectively combine and dispatch products as per its customers’ requirements and cut down on intermediary costs and time delays.
However, such a move would also have its disadvantages. Currently, it is for Samyan to manage the distribution centers and saves the hassle for MicroFridge to focus on more important tasks. Increased ownership and responsibility would result due to the operation of distribution centers by the parent company itself. Moreover, the cost of running the distribution centers would have to be borne by MicroFridge, such as security arrangements, hiring relevant workforce and managing inventory.
3. Strategic Alternative 2
Another important strategic alternative for MicroFridge is that it should start offering a larger product range. This is because the company has attained success due to its brand name MicroFridge, which is also the identity of the company. Hence, using the parent brand name as an identity and launching more products for “home away from home” market can lead to higher sales revenues for the company. Currently, MicroFridge is primarily focused upon MicroMart, MicroBar and MicroFridge. However, as the company name is established well in the United States, it should look to offer a bigger product range.
Firstly, such a move would be advantageous to the company because using the success of its previous brands; the company’s sales team can forecast sales for newer product ranges. Such a move would also prevent competition from exploiting the vulnerable position of the company. Since Bennett has himself been involved in engineering and innovating processes, he can contribute majorly to research and development initiative in the organization. Secondly, the company has already thought about innovative product ranges and can invest in electronic products for the customers’ homecare needs.
Product innovation is significant for MicroFridge because currently it has a limited product range which is primarily dependent on one international supplier. The current product range of MicroFridge may reach saturation as competition comes in and as most of the market has already been captured for MicroFridge, MicroMart and MicroBar. Hence, to stay competitive, electronic products and those for homecare requirements need to be launched.
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